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Even Good Change Means More Compliance

Simplification was the word used more than 15 years ago when Regulation Z was rewritten. The then new and completely revised Regulation Z was indeed a marked improvement over its intricate predecessor. However, we learned something significant in the process of simplifying Regulation Z: all change increases work, at least temporarily.

Change means that we must go in and review our policies, procedures, manuals, forms, training programs, monitoring and audit procedures anything that translates the regulation to the work that must be done. Although the purpose is improvement, the process is work intensive.

Change also contains some danger. Habits die hard. Whenever a rule or procedure changes, staff needs to unlearn the old rule and break old habits. This can be a difficult and unpredictable process. Regulatory change therefore means that the compliance program should give careful attention to job tools and training.

What we see in this new act is burden editing rather than major overhaul. In fact, burden wouldn't really be relieved unless most of the consumer protection provisions were completely repealed and that will never happen.

As a result of this burden editing process, certain aspects of tasks that must be performed in the bank will be easier to do. It will be a little easier to train staff. There is a slightly reduced risk of liability. But the program that manages regulatory burden and risk and makes the regulatory requirements actually happen on the job, the compliance program, must remain in place. There is still a big job to be done.

The regulatory agencies must do their part of this within six months. Six months is a very short time period to design and issue the types of regulatory reforms triggered by the act. This means that you should start thinking now about the consequences of these changes and how they should be designed to really reduce burden. Then, share your thoughts and ideas with the regulators.

Your participation in the comment process is essential. It is the only way the regulation drafters get information they need to be sure that the result is burden reduction and not just change.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 16, 10/96

First published on 10/01/1996

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